Auto lenders are taking a no-nonsense approach today — and that can hit dealers where it hurts.
Lenders are taking harsher actions if they discover fudged information on auto loan paperwork sent by dealerships on behalf of customers.
“Dealers typically aren't bad, it's usually a bad apple at the dealership responsible for something like that,” says Chuck Roscow, Chevy Chase Bank's senior vice president-consumer lending division.
That includes falsely saying a consumer made a substantial down payment. Lenders are more likely to approve a loan and at a more favorable rate if a sizable down payment is part of the deal.
“There are cases when the dealership information lists a $3,000 down payment, but then we repossess the car and pull the deal jacket, and there is no receipt for a down payment,” Roscow says.
He adds: “When that happens, we'll collect that $3,000 from the dealership. No receipt means someone at the dealership has fluffed the deal.”
Roscow says his bank is “experimenting” with a plan to share losses with a dealership if certain vouched-for auto loans go bad.
He explains: “If the dealer has given a personal guarantee that a particular customer is a good credit risk, and if that turns out to not be the case and we have to repossess the car, it doesn't go to the auction. It goes to the dealership.”
Essentially the message is: “Here's your problem,” Roscow says.